Straight Talk About the S&Ls

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LITTLE wonder that Washington is increasingly at odds over the multibillion dollar US savings and loan bailout: Lawmakers from both parties are linked to the scandal. And total cleanup costs keep escalating. They're now reckoned at somewhere between $150 billion and $500 billion over the next 40 years. That's a Pentagon-sized appropriation. Thus, some Democrats blame President Bush for what they perceive as his ``tardiness'' in prosecuting the wrongdoers. The President, meanwhile, announced a stepped-up program to pursue and jail thrift officials who defrauded their depositors.

That's fitting. The misdeeds of a few scoundrels should not be allowed to tarnish the reputation of the entire thrift industry - nor indefinitely drain the federal treasury. Seized S&L assets should be quickly sold.

It would be unfortunate, however, if the scandal became partisan. There's more than enough blame to go around. Clearly, the S&L mess involved failure at the highest levels of government, especially during the mid-to-late 1980s. Where were the regulatory watchdogs who should have been zealously monitoring all those new financial institutions that sprouted during the financial deregulation of that era? And where were the congressional committees who are supposed to keep their eyes on the federal banking regulators?

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S&L interests contributed over $11 million to congressional candidates from both parties through the '80s, and the biggest political contributors included high-flying thrifts that have now gone belly up. These facts point toward corruption.

Some straight talk and level-headed policymaking are now in order. The Congressional Budget Office says that administration estimates of the cleanup cost are far too low and that massive new expenditures will be needed. Public accountability requires that Washington get the truth out on the table. And what about the well-being of other financial or economic institutions? Are regulators privately finding any of the problems that marked the S&Ls - such as privileged loans, overdue accounts, and grand lifestyles - repeating themselves among commercial banks? And what about the US private pension system? Some reports suggest that corporate pension funds may not be as safe as the regulatory agencies sanguinely insist.

Out in private industry, many companies follow the rule that the time to take extra-careful scrutiny of the corporate books is following a period of booming expenditures and great growth, when the mood was one of happy partying. Economically, the 1980s represented such a period. Thus, this seems a timely moment for Congress to take careful stock of the ledgers of the main US financial institutions, from the S&Ls and commercial banks to the nation's pension funds. Such an inquiry would enable Washington to ensure that deregulation is not creating more problems than it was supposed to resolve - and that this scandal will not repeat itself.

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